Data: S&P Global; Chart: Axios Visuals

The number of bonds trading at distressed levels has continued to fall since the Fed stepped in with its QE infinity program and promise to buy hundreds of billions of dollars in corporate debt.

Why it matters: The recovery has disproportionately benefited sectors where the Fed has shown it is willing to intervene, as companies with weak credit ratings have issued far less debt this year and still face elevated default risk.

What's happening: The U.S. distress ratio — the percentage of speculative grade issuers trading 1,000 basis points above comparable Treasury yields — declined to 12.7% as of June 19 from 22.8% as of May 6, S&P Global reports.

  • S&P notes that investment-grade issuance has reached all-time highs this year, though issuance at the lower rating categories is still limited.

What they're saying: "The steep global recession and sudden and deep market dislocation have taken a heavy toll on speculative-grade issuers' revenues and access to funding sources," Sudeep Kesh, head of S&P Global Credit Markets Research, said in a note to clients.

  • "Due to central banks' and governments' rapid and sizable support programs, credit markets have since reopened, but access remains limited for riskier issuers rated 'B-' and below."
  • Oil and gas has the highest distress ratio of any sector at 40.2%, with $34.3 billion in distressed debt outstanding, or 29% of the total distressed debt, per S&P's data.

Go deeper

Dion Rabouin, author of Markets
Oct 9, 2020 - Economy & Business

Investors position for more QE in Europe, but not in U.S.

Illustration: Aïda Amer/Axios

Bond yields are rising in the U.S. but falling in Europe as investors are betting on a new round of central bank policy divergence.

What's happening: Benchmark U.S. 10-year Treasury yields are holding near their highest since early June. Yields jumped after minutes from the Fed’s September policy meeting did not mention plans to shift quantitative easing bond purchases toward longer-dated maturities, which many investors had been pricing in for months.

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The state of play: Zeta was expected to make landfall on the northern part of the Yucatan Peninsula Monday night, bringing with it a "dangerous storm surge" and "heavy rainfall" as it moved into the Gulf of Mexico, the National Hurricane Service said.

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